Despite the apparent success of a French-led military force in ridding Northern Mali from an armed separatist movement, recent violence has suggested that significant challenges remain to both that country and the energy sectors of its neighbors.
As recently as this past weekend, a car bomb and violence were reported in Timbuktu, once again highlighting the uncertainty of the region and the challenges of those in the region in need of a more stable business environment.
As much of North Africa has struggled with wide-ranging political opposition movements, resulting in the collapse of long-standing governments, Algeria has remained unchallenged by protest efforts. Rather, threats to the country’s stability have come from outside, with substantial pressure coming from a stretch of Mali along the country’s southern border. The country has struggled with an armed separatist movement for months, which seized authority from national troops late last year.
This pressure boiled over into Algeria in January with a coordinated raid on a BP gas site, spurring a messy government response and ending with the death of 38 foreign workers. The impact was immediate, with foreign firms suggesting delays to protect their personnel and neighboring Libya promising swift action against any similar events.
More than just an unfortunate turn of events for a country that relies heavily on energy revenues for just about every aspect of government spending, the event presented a real threat to vital foreign investment needed to strengthen and expand the country’s infrastructure. Algeria currently boasts access to about 12.2 billion barrels in oil reserves and 159 tcf of natural gas, with the U.S. as one of their largest trading partners.
However, a recent decline in local production and a push to tap into the country’s sizable shale potential have highlighted the role of foreign investment in the country’s immediate energy growth plans. To reach new output goals, Algeria will contribute billions from their own coffers towards boosting downstream capacity, but they will also need to partner with foreign partners who can offer the investment support and technical know-how needed to boost production exploit shale reserves in the near future.
Algeria has promoted substantial shale potential, attracting a number of necessary foreign firms to their shores, each providing the equipment and experience needed for the introduction of shale to the region. Keeping them in place may prove a little more difficult unless Algeria can provide a more stable working environment, making the kind of flare-ups seen this week all the more damaging.
Originally Posted: Newsbase’s MEA Downstream Monitor